Angela Merkel, German chancellor, will this month launch a sweeping initiative for the harmonisation of US and European legislation to boost investment flows and trade between the world?s largest economic blocs. Initial talks will review financial market regulations, including delisting rules, which many US-listed European companies feel are too cumbersome, as well as intellectual property law. Ms Merkel is also seeking mutual recognition of technical standards for products such as cars.... Her ambition is to create a single transatlantic market for investors, with common rules and standards on issues such as intellectual property and financial regulation. However, her initiative may face opposition from a more protectionist US and other EU member states.... ?Our economic systems are based on the same values,? said Ms Merkel. ?We have learnt how to combine the Anglo-Saxon and Continental European legal systems, which are very different from one another . . . think transatlantic co-operation will be more straightforward in many areas than might appear at first glance.? Ms Merkel?s initiative marks the EU?s first attempt to achieve a transatlantic single market since a similar move by the European Commission in 1998 petered out because of French opposition. Formal negotiations on drafting the partnership should start at the EU-US summit in May, she said. Matthias Wissmann, chairman of the German parliament?s Europe Committee, estimates that the integration of US and EU financial markets alone could be achieved by 2015 and would cut trading costs on both sides by 60 per cent and the cost of equity capital by 9 per cent. Ms Merkel stressed that tariffs and customs duties were not part of her plan.

At the forthcoming EU-US summit we want to talk about ever-closer economic co-operation. Our economic systems are based on the same values. The EU and the US have sophisticated patent legislation. We have regulatory mechanisms governing our financial markets. We should be looking for ways to keep developing these together at a transatlantic level. We must watch out that we do not drift apart, but instead come closer together, where there are clear advantages for both sides. For example, it causes unnecessary friction for patent rules in the US to be structured differently from those in the EU. I think our economies can save a lot of money and effort, in stock market share offerings, for instance, or in setting technical standards. We face the same tough competition from Asian markets, and from Latin America in the future. We must join forces and co-operate, for instance in the fight for better intellectual property protection in the global market.

ME: There seems to be a catch-22 on reviving Doha. Other countries won't negotiate seriously with the United States unless they believe that we can get TPA renewed. At the same time, the only way that TPA is likely to be renewed is if Congressmen seen the outline of a Doha deal. How does one escape this conundrum? [USTR SUSAN] SCHWAB: Good question. [Long pause.]

The Doha round of global trade talks stalled after hitting numerous roadblocks over the summer. Now the White House is working to revive negotiations, even as a new barrier looms: a Congress much more skeptical of free trade. Administration officials have stepped up the campaign to win support for its plan. Trade Representative Susan Schwab, who spent years as an aide on Capitol Hill, is wooing the incoming trade czars of the new Democratic Congress. Speaking recently to the U.S. Chamber of Commerce, she urged cooperation on trade and Doha. "We cannot let a strong, potential Doha deal slip through our fingers," she said. Treasury Secretary Henry Paulson is rallying support for Doha around the globe. In London, he said Doha remains the administration's "top trade priority," even with the change in control of Congress next year. In Geneva, U.S. negotiators, after months on the sidelines, are taking part in fresh talks with trading partners on thorny issues, such as cutting farm supports. The administration is banking that all the political maneuvering will help inject some momentum back into the talks by the spring. The goal isn't necessarily to finish a deal then, but to show enough progress to persuade skeptics in Congress to extend the president's trade-negotiating authority beyond June, when it is set to expire. That authority lets the president negotiate deals with other countries, and put them to Congress for an up-or-down vote -- without amendment. As a practical matter, nations generally don't like to sign deals that could be changed in Congress, so extending that authority would buy U.S. negotiators some extra time to seal a Doha deal. Whether the Bush administration is able to restart the Doha talks could serve as a measure of the muscle behind critics of free trade in the U.S. And if the impasse on Doha becomes permanent, it could herald the closing of the era of global economic integration that began after World War II. "A failure of Doha really would signal a crisis of confidence in the multilateral trading system," said C. Fred Bergsten, director of the Peter G. Peterson Institute for International Economics, a free-market think tank in Washington. "The WTO would continue to exist. But there would be a big loss of its standing and its credibility." (emphasis added)

[T]he Economist Intelligence Unit conducted a wide-ranging survey of 286 executives spread across the world?s main trading regions. The key findings from the research are highlighted below. Protectionism is thought to be on the rise, particularly in the developed world. Just over 50% of survey respondents thought that protectionism was rising either significantly or moderately in developed markets, with only 16% believing that it was falling (30% regarded the level of protectionism in those markets as stable). A smaller proportion, although still narrowly the majority, of respondents (39%) thought that protectionism was increasing in emerging markets, whereas one-third reckoned it was declining. In practice, while protectionism is difficult to track, its impact on growth is significant. The impact on business can be severe... Economist Intelligence Unit forecasts show that a relatively modest backlash against globalisation could shave nearly a full percentage point off world GDP growth over the period 2011-2020. One in five executives to express a view (38 companies in total) say their company has had an investment deal fail in a certain market owing to local trade and investment rules over the past three years. More happily, 25% of the overall sample have entered a new market in that same period because of changes in the rules.

It?s our contention that even if the Democrats had not swept the House and Senate elections, the US would still face increasing difficulty as the political arena wrestles over the challenges of adjustment to globalization, especially dealing with a downside which includes mitigating pain at home, and enforcing better behavior by trading partners.

The US Congress will reject two trade deals agreed with Colombia and Peru, leading Democrats said, in a significant blow to President George W. Bush?s agenda for his final two years in office. Democratic lawmakers drafted a letter to Mr Bush on Tuesday night signalling their opposition to the pacts because they lacked tougher labour standards, while a senior congressman rebuked the president for pressing ahead with today?s signing of the Colombian deal. The fissure worsens the outlook for the administration?s bilateral trade agenda in the wake of the Democrats? mid-term election sweep and will disrupt economic integration with the Latin American countries. Sander Levin, a leading Democratic voice on trade issues, said the letter would send a clear signal that ?the agreement would not receive the support of the vast majority of Democrats, as presently put together?.... The congressman said labour standards were at the ?core? of Democrats? objections - a sign that the influence of the labour movement within the party has been strengthened by the election result, which saw a notable rise in economic populism among voters.

"We watch the news and we're nervous about what might happen with what we send to the United States," said Janeth Palacio Ramirez, 35, who supports her 15-year-old daughter and her elderly parents by punching zipper stops onto 7,000 pairs of jeans a day, earning about $200 a month. "Everything we make here goes there, so if there are problems with exports, we'll all lose our jobs.".... The fortunes of Colombia and Peru -- home to more than 72 million people -- may hang in the balance. So, too, might the nature of American engagement with Latin America, regional experts say. The rejection of trade pacts with these countries would humiliate their leaders at a time when they stand as bulwarks against the anti-American populism pressed by Venezuela's president, Hugo Chavez. Latin America was already recoiling at the prospect of the United States fencing its southern border against illegal immigration. Now, some see the nation walling off its huge marketplace, rescinding the promise of trade, long proffered by the Bush and Clinton administrations as a means of furthering development. "If you really look at the U.S. agenda in Latin America, trade is the only positive," said Michael Shifter, vice president for policy at the Inter-American Dialogue in Washington. "The rest is immigration, anti-narcotics. It's all negatives." Latin Americans, he said, may well start to question "how serious Americans are about having a constructive relationship."

ME: There seems to be a catch-22 on reviving Doha. Other countries won't negotiate seriously with the United States unless they believe that we can get TPA renewed. At the same time, the only way that TPA is likely to be renewed is if Congressmen seen the outline of a Doha deal. How does one escape this conundrum? SCHWAB: Good question. [Long pause.]

The US should offer to end distorting farm subsidies within five years in a bid to revive global trade talks and avoid a clampdown by the World Trade Organisation, according to a report released on Wednesday by an influential group of economists and agriculture officials. Agricultural subsidies have emerged as the key barrier to progress in the stalled Doha round of multilateral trade talks, though such unilateral action by the US would face fierce opposition as the administration weighs new farm legislation next year.... The year-long study by the task force recommends a raft of measures to replace the existing US subsidy programme, which fed around $20bn to farmers last year, most of it focused on commodity crops such as cotton and corn. Mike Johanns, the US agriculture secretary, has already stated that the system instituted by the existing farm bill in 2002 may have to change, targeting support at emerging sectors such as biofuels and avoiding further challenges by the WTO. Brazil has already won at a case against US cotton subsidies through the WTO, and there are fears that this could trigger further challenges against crops such as rice and soyabeans. ?If we don?t take the lead in reducing and eventually ending trade-distorting subsidies, the WTO legal system will do it for us,? said Gus Schumacher, a task force co-chair and former USDA under-secretary who managed the farm subsidy programmes. ?We?ll lose control of key farm policy tools and miss the export expansion opportunities in emerging markets that a successful Doha round could bring.? The health of the US farm economy has improved after two years of bumper crops, rising exports to emerging markets and the boom in corn-derived ethanol, but influential lobbyists such as the American Farm Bureau are pushing for the existing subsidy regime to be extended. The task force called for the system to be reformed to comply with WTO rules by introducing alternatives such as subsidised insurance programmes to counter poor harvests and sharp falls in global commodity prices. Other measures include new tax-efficient savings accounts for farmers and payments to support environmental initiatives.

We propose that the entire grouping of product-specific, tradedistorting income and support programs, including countercyclical and loan deficiency payments, price supports, and federal crop insurance and disaster payments, be replaced with a new portfolio of approaches that are nondistorting and compliant with WTO green box rules, including:

Direct payments that are delinked from specific types of production and from market conditions so as to comply fully with green box standards and that are only used during a transition period until other approaches are fully developed A universal revenue insurance program covering all commodities on a multiproduct basis that allows farmers to purchase coverage at subsidized rates to protect against losses in price and in production A new land stewardship program that recognizes and rewards the value of the environmental contributions made by farmers and pays producers according to the kind and amount of environmental goods and services they provide Farmer savings accounts similar in structure to tax-deferred 401(k) accounts that are backed by government matching contributions and that could be tapped for a variety of farm household costs, including health care, education, or retirement savings A significant investment in public goods that benefit the entire farm sector, including research and infrastructure projects; not less than 20 percent of the federal baseline funds currently committed to trade-distorting domestic support programs (in addition to money spent on stewardship and conservation programs) should be redirected to investments in these sectorwide public goods Transition measures to protect farmers and owners of rented farmland against investment losses such as declining land values as a result of the proposed changes to support programs

The proper development, experimentation, and implementation of these new programs will take time, but should be accomplished within the five-to-six-year term of the next farm bill.

?Ethical? coffee is being produced in Peru, the world?s top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage. Industry insiders have also told the FT of non-certified coffee being marked and exported as Fairtrade, and of certified coffee being illegally planted in protected rainforest. This casts doubt on the certification process used by Fairtrade and similar marks that require producers to pay the minimum wage. It also raises questions about the assurances certifiers give consumers about how premium-priced fair trade coffee is produced. As the board member of one Peruvian Fairtrade-certified coffee producer told the FT: ?No certifier can guarantee they will purchase 100 per cent of a co-operative?s production, so how can they guarantee that every bag will be produced according to their standards?? Though certified coffee makes up less than 2 per cent of the global coffee trade it has become increasingly mainstream as large retailers such as Starbucks and McDonald?s adopt it. The FT visited five Peruvian smallholdings, all of which have Fairtrade certification. Each farm hires 12-20 casual coffee pickers during the harvest season. All house and feed their workers, which allows them to deduct 30 per cent from their wages. After that reduction from the legal daily minimum wage for casual agricultural workers of 16 soles ($5), farm owners are still obliged to pay at least 11.20 soles a day. In four of the five farms visited by the FT, pickers received 10 soles a day, while the other farm paid workers 12 soles a day. Luuk Zonneveld, managing director of Fairtrade Labelling Organizations International, the Bonn-based body that sets fair trade standards, told the FT that the certification system ?is not fool- and leak-proof? but said the problem should be put in context. ?Poor farmers often struggle to pay their workers fairly,? he said. ?Why are casual labourers there at all? There are wider issues here. We need to ask why this goes on and what we can do to help.?

?No certifier is able to check that at no time are workers paid below minimum wage,? says Luuk Zonneveld, Managing Director of Fairtrade Labelling Organizations International (FLO) in Bonn. ?This issue comes up everywhere. Poor people struggle to pay their workers fairly.? The FT?s findings cast doubt on the certification process. ?The low pay issue wasn?t picked up in our audit because it wasn?t done at harvest season,? says Chris Wille, Chief of Sustainable Agriculture at Rainforest Alliance. However, Mr Wille says his organisation is aware of the problem and is developing a plan to tackle it. ?There no way to enforce, control and monitor ? in a remote rural area of a developing country ? how much a small farmer is paying his temporary workers,? says the founder of one Peruvian Fairtrade-certified coffee producer. ?Many farmers are earning less than minimum wage themselves.? Although farmers were paying casual labourers less than the minimum wage in four out of the five certified farms visited by the FT, Mr Zonneveld contends that low pay is not systemic in the coffee sector. That is a view contradicted by Eduardo Montauban, head of the Peruvian Coffee Chamber, a private exporters? group. ?No one in the industry is paying minimum wage,? says Mr Montauban. ?It?s simply not feasible for producers.?

1) If fair traders really want workers to receive what they believe is a living wage, they're going to have raise the price of properlylabeled coffee; 2) The Rainforest Alliance can't be all that serious about enforcement -- why conduct an audit during off-harvest time unless you are trying not to find violations? 3) Simply demanding that coffee owners pay higher wages won't work -- that's not the market price for labor. This isn't because of evil multinational corporations -- it's the nature of commodity markets in general, plus the labor market in Peru

President Bush today selected U.S. Trade Representative Rob Portman to be the new director of the Office of Management and Budget, moving quickly to revamp his team now that his new chief of staff is in place.... Bush, at a morning announcement at the White House, said Portman would "have a leading roll on my economic team." As Portman's replacement as trade representative, Bush chose deputy trade representative Susan Schwab, a veteran from the administration of George H.W. Bush who has also worked in the private sector for Motorola, among other companies. Schwab was president and chief executive officer of University System of Maryland Foundation before joining the current Bush administration.

Rob Portman?s unexpected removal from the post of US trade representative on Tuesday evoked concern among governments and trade experts that the US was downgrading the importance of the so-called ?Doha round? of World Trade Organisation talks.... Peter Mandelson, the EU trade commissioner, issued a barbed statement that qualified praise of Mr Portman and Susan Schwab, currently deputy trade representative and Mr Portman?s nominated replacement, with implied criticism about the timing of the move. ?I have very much enjoyed working with Rob Portman and I shall be sorry to see him go from this post,? Mr Mandelson said. ?We will of course manage without him, but at this stage in the round, it would have been easier to manage with him.? Privately, other EU officials were less diplomatic, suggesting that the move sent out a clear signal that the US regarded the Doha round as dispensable. ?On the face of it, this looks like bad news for the talks at a time when negotiations are at a fragile point and it is bound to lead to further uncertainty,? one official said. The official said that the one bright spot could be that the US would use the change of personnel as cover to moderate its demands for wholesale farm liberalisation in the Doha round.... Lobbyists and trade experts in Washington said that Ms Schwab was technically very well qualified to succeed Mr Portman. But several said that although she had good contacts on Capitol Hill, she would not enter the job with the same political influence as her predecessor.... Tom Buis, president of the National Farmers Union, said: ?To me it sends a signal that things aren?t moving as smoothly as anticipated on the trade deal. It may be a realisation that Doha is not going to be the success that the administration hoped it would be.?

The US on Tuesday named Rob Portman, the politically savvy trade representative, to head the White House budget office, a move that signals growing concern over runaway federal spending and a downgrading of trade policy in the administration?s second term.... ?There is an awful lot of negativism now about the prospect of trade liberalisation and a backsliding on trade,? a leading Republican strategist confirmed. ?There is a sense of giving up on bilateral trade deals and on Doha.? Clay Shaw, a Florida Republican and chairman of the House Ways and Means Trade Subcommittee, told Congress Daily: ?If the Doha round is doomed for failure ... this may be a case of looking for where [Portman?s] talents, which are extraordinary, can best be used.?